Types

• The only time a lender will initiate foreclosure proceedings is when a homeowner is behind on his mortgage payments. However, if the homeowner is behind on property or income taxes, foreclosure proceedings are initiated by the county or the IRS directly, not the lender.
  
  

Escrow Considerations

• Many loans have an escrow account in which the property taxes and homeowner's insurance premiums are factored in to the monthly payment and distributed to the county tax office and insurance company as the payments become due. However, when a borrower falls behind on his payments, the mortgage company pays the taxes and premiums up front, and will continue to do so if the borrower is foreclosed on. When this happens, the lender initiates the foreclosure.
  
  

Lien Priority

• A mortgage is a lien on a property, meaning that the mortgage holder has a vested interest in the property. If no mortgage exists and a borrower falls behind on her property taxes or income taxes, the tax office or IRS will initiate foreclosure proceedings. Tax entities take first position for payment upon a foreclosure sale. Then any remaining proceeds of the sale are distributed accordingly to any additional mechanic's liens or unsecured debt liens.